Traditional banks go digital as neobanks face regulatory heat

As regulators target neobanks, traditional financial institutions are starting to act more and more like neobanks.

Open banking is set to transform financial services in the United States, and the approach, unlike in Europe, is being driven by the market rather than government. The series of announcements served to highlight digital innovations that are changing the way people open accounts and connect them to other offerings beyond direct deposit.

In other words, the traditional practice of going to a bank branch to join a customer base or to use new services added to new accounts is increasingly relying on digital workflows.

In October, Consumer Financial Protection Bureau he noticed that his proposal open banking principle This would make it easier to switch accounts because consumers would have authority and control over their data.

The stage has been set for greater digital innovation

All signs point to individuals and businesses being able to forge stronger digital relationships with their financial institutions.

As detailed in the latest PYMNTS Intelligence report,How the digital world works” report, among 60,000 consumers surveyed in 2023 — a representative sample of about 800 million people living in 11 countries — 42% use online banking. A total of 46.8% bank via mobile means. About two-thirds of consumers used a phone app for banking (mobile banking, 68.6%) or their desktop computer via a browser (online banking, 66.6%) at least once a month.

Banks are examining and re-examining their technology stacks to take full advantage of instant paymentsopening digital accounts and embedded financing, alongside other initiatives.

During a panel discussion with PYMNTS in June Galileo Head of Product Strategy Michael Haney he said foldable banking “it is becoming imperative to improve operational efficiency in these traditional banks and better respond to customer needs and industry trends.” The new generation of platforms is based on MACH principles: microservices, APIs, cloud, and headless.

As for some With last technology-based initiatives, Bankjoy AND Fan partnered in April to help financial institutions offer their customers a seamless way to set up their direct deposit. Through the partnership, Bankjoy will help its banking and credit union customers integrate Pinwheel’s digital deposit switching solution.

Last month, MasterCard he said he would add new ones open banking– powered solutions that make it easy for consumers to automatically switch their direct deposits and update their recurring bill payments. These capabilities are expected to be a result of the integration of Deposit Switch and Bill Pay Switch with Mastercard open banking platform and delivering these solutions in collaboration with Atomic.

Neobanks face more regulation

As traditional players shift more of their efforts to digital channels, neobanks will face pressure to become more like, say, traditional banks.

Last month, following Synapse collapsethis Federal Deposit Insurance Corp. (FDIC) has issued a warning to consumers about the risks associated with opening accounts non-bank companies, including neobanks. The cease and desist letters highlighted that some of these companies claimed that the accounts were FDIC-insured when they were not.